Fired U.N. Official Seen as Fall Guy

NEW YORK – The first and so far only U.N. employee to be fired in connection with the Oil-for-Food (search) scandal believes he's being made the fall guy to protect top-level officials at the United Nations.

Documents obtained by FOX News appear to bolster the claim of Joseph Stephanides (search) that he was wrongly let go. Stephanides, fired on Tuesday just a few months shy of his planned retirement when he turns 60, intends to appeal his dismissal.

To read the documents referenced in this story, click on the "Links" tab in the box to the right or click on the words highlighted in maroon.

Stephanides was fired from his post as head of the Security Council Affairs Division because U.N. Secretary-General Kofi Annan (search) concluded he had committed "serious misconduct" in the process of awarding a contract to Lloyd's Register Inspection Ltd. in 1996. At the time, the Oil-for-Food program was getting off the ground.

Annan said that Stephanides violated U.N. rules by going to bat for the British company. A high-ranking U.N. official told FOX News that Stephanides told the British Mission to the United Nations how much lower Lloyd's should price its bid to snag the contract.

But Stephanides' defense is that he was only carrying out what Security Council members told him and what his U.N. bosses officially authorized.

Internal U.N. documents obtained by FOX News seem to contradict the accusation in the Volcker report. The documents suggest that Stephanides obtained clearance from his superiors before instructing U.N. procurement officers "to obtain a substantial price reduction" from Lloyd's.

Lloyd's ended up getting the contract to inspect humanitarian goods entering Iraq under the program, beating out Bureau Veritas, a French firm. The bid by Bureau Veritas was $1.1 million less than that of Lloyd's.

In an Aug. 6, 1996, memo to Allan Robertson, the officer in charge of the U.N. Procurement and Transportation Division, Stephanides noted that "there exists a large gap between the quoted price of Bureau Veritas and that of Lloyd's Register. I would, therefore, be grateful if you would contact the latter to obtain a substantial price reduction," Stephanides wrote in conclusion.

The Aug. 6 letter was first sent to Stephanides' boss, Marrack Goulding, one of the top honchos in the U.N.'s Iraq Steering Committee supervising Oil-for-Food, with a cover letter asking for approval, which Goulding gave.

Two days after Stephanides sent the memo, the U.N.'s Iraq Steering Committee met to discuss the matter. Later that day, Stephanides sent a follow-up memo to Robertson and again urged him to seek a lower price. Copies of this memo also went to Goulding and to Chinmaya Gherekahn, head of the Steering Group.

In its own examination of the issue, the Volcker report admits that the Aug. 8 meeting "in all likelihood" took place, but says that minutes from the meeting don't seem to be in the U.N. records that it examined.

Stephanides' harsh treatment is in contrast to the treatment handed out to Benon Sevan (search ), the senior U.N. official who was hand-picked by Kofi Annan to head the Oil-for-Food program. The Volcker committee concluded that Sevan had repeatedly sought out lucrative oil vouchers from Saddam Hussein, worth millions of dollars, placing himself in a "grave conflict of interest." Sevan has denied the charges, but Volcker considers the case proved. Sevan remains under suspension, on a $1 a year contract.

Meanwhile, Iqbal Riza, Annan's former chief of staff who spent months shredding documents that were supposed to go to the Volcker committee for investigation, was allowed to retire without any penalty, and is still serving as an adviser to the secretary-general. In his defense, Riza said the documents were only copies, a point the Volcker report disputed.

Asked if there was a double standard at work in terms of the United Nation's treatment of Sevan and Stephanides, a senior U.N. official said no. The Sevan matter was still being investigated by the Volcker panel, he said.

Plus, the official said that Stephanides may not be the only person to be fired. With the coming final portion of Volcker's investigation, that report "may show bigger fish" were involved.

The official, who spoke on condition of anonymity, added that British government officials had material evidence that Stephanides operated outside of his mandate and that they were the ones to provide this proof of misconduct to the Volcker committee. The United Nations offered to share that evidence with Stephanides and his lawyer, but the lawyer refused, the official said. After waiting two weeks, Annan decided to proceed with the firing.

The testimony offered by the United Nations was the text of interviews conducted with British officials by the Volcker committee during its investigation. And the condition of sharing it with Stephanides was that he agree to keep it confidential and accept the testimony as is.

Stephanides and his lawyer argued that this would deny him the right to talk to the British witnesses, obtain the context of their testimony and otherwise examine them properly. Stephanides also argued that he did not know the deal the United Nations had struck with the British government to get the material in the first place, and asked for the U.N.'s own correspondence in connection with the testimony. Those requests were ignored. According to the documents, it was the United Nations that fell silent, rather than Stephanides.

In a statement released Friday, Stephanides said he wanted to express his "great disappointment" over his dismissal and he vowed to appeal

"This decision came as a complete surprise," he said. "During the four months I was suspended from service I was never afforded a hearing or given any response to my written submission."

Stephanides also suggested that he was simply doing his job.

"My letter of dismissal merely repeats the earlier allegations while ignoring my proof that my contacts with the UK delegation, as with all members of the Security Council were done pursuant to my designated responsibilities as liaison between the Member States and the UN Steering Committee, which was composed of senior UN officials who were the ultimate decision makers," he said.